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No.

16712

In the Supreme Court of the United States


__________

OIL STATES ENERGY SERVICES, LLC,


Petitioner,
v.

GREENES ENERGY GROUP, LLC, et al.,


Respondents.
__________

On Writ of Certiorari to the


United States Court of Appeals
for the Federal Circuit
__________
BRIEF OF THE CATO INSTITUTE AND
AMERICAN CONSERVATIVE UNION
FOUNDATION AS AMICI CURIAE
SUPPORTING PETITIONER
__________
GREGORY DOLIN ILYA SHAPIRO
University of Baltimore Counsel of Record
School of Law Cato Institute
1420 N. Charles Street 1000 Mass. Ave. N.W.
Baltimore, MD 21201 Washington, D.C. 20001
(410)837-4610 (202) 842-0200
gdolin@ubalt.edu ishapiro@cato.org

August 31, 2017


i

QUESTION PRESENTED

Whether inter partes review, an internal process used


by the Patent and Trademark Office (PTO) to analyze
the validity of existing patents, violates the
Constitution by extinguishing private property rights
through a non-Article III forum without a jury?
ii

TABLE OF CONTENTS
QUESTION PRESENTED ........................................... i
TABLE OF AUTHORITIES ....................................... iv
INTEREST OF AMICI CURIAE ................................. 1
SUMMARY OF ARGUMENT ..................................... 2
ARGUMENT ................................................................ 3
I. PATENTS ARE PROPERTY AND MUST BE
TREATED AS SUCH........................................... 3
A. Patents Have Historically Been
Understood to Be the Patent Holder's
Private Property ............................................. 3
B. The Power to Adjudicate Patent Rights
Has Always Been Committed Exclusively
to the Judicial Branch .................................... 6
C. Patent Rights Are Private Rights and
Must Be Adjudicated in Federal Courts ...... 10
II. THE PTAB IS INCOMPATIBLE WITH
THE FUNDAMENTAL PURPOSE OF
ARTICLE III ...................................................... 16
A. The PTAB Undermines Litigants Rights
to Have Cases Fairly Adjudicated ............... 16
B. The PTAB Undermines the Role of the
Courts in Our Tripartite System of
Government .................................................. 21
III. THE PTABS POWERS ARE TOO BROAD AND
THE JUDICIAL REVIEW TOO
CIRCUMSCRIBED TO SURVIVE UNDER
THIS COURTS PRECEDENTS ....................... 24
iii

A. The PTAB Exercises Powers Beyond


Anything Previously Endorsed by this
Court ............................................................. 25
B. Judicial Review of PTAB Decisions Is
Too Narrow to Satisfy Article III ................. 29
CONCLUSION .......................................................... 32
iv

TABLE OF AUTHORITIES
Page(s)
Cases
Ames v. Howard,
1 F. Cas. 755 (C.C.D. Mass. 1833)............................ 6
Atlas Roofing Co. v. Occupational Safety & Health
Review Commn, 430 U.S. 442 (1977) ........ 10, 11, 12
Block v. Hirsh,
256 U.S. 135 (1921)................................................. 26
Blonder-Tongue Labs., Inc. v. Univ. of Illinois
Found., 402 U.S. 313 (1971) ................................... 19
Bowsher v. Synar,
478 U.S. 714, 736 (1986) ......................................... 32
Case of Hayburn,
2 U.S. 408 (1792)..................................................... 23
Cepheid v. Roche Molecular Sys., Inc.,
IPR201500881 (P.T.A.B. Sept. 17, 2015) ............. 18
Charles River Bridge v. Warren Bridge,
36 U.S. 420 (1837)..................................................... 6
Commodity Futures Trading Commn v. Schor,
478 U.S. 833 (1986)..........................................passim
Consol. Fruit-Jar Co. v. Wright,
94 U.S. 92 (1876)..................................................... 13
Crowell v. Benson,
285 U.S. 22 (1932)............................................. 11, 26
v

Cuozzo Speed Techs., LLC v. Lee,


136 S. Ct. 2131 (2016)....................................... 30, 32
Detroit Citizens Street R. Co. v. Detroit R. Co.,
171 U. S. 48 (1898).................................................... 6
Evans v. Jordan,
8 F. Cas. 872 (C.C.D. Va. 1813) ....................... 4-5, 15
Ex parte Bakelite Corp.,
279 U.S. 438 (1929)................................................. 11
Ex Parte Wood & Brundage,
22 U.S. 603 (1824)............................................ 7-8, 14
Gayler v. Wilder,
51 U.S. 477 (1850)..................................................... 5
Gordon v. United States,
69 U.S. 561 (1864)................................................... 23
Granfinanciera, S.A. v. Nordberg,
492 U.S. 33 (1989).................................. 10, 11-12, 32
Hayden v. Suffolk Mfg. Co.,
11 F. Cas. 900 (C.C.D. Mass. 1862) .......................... 8
Horne v. U. S. Dept of Agriculture,
133 S. Ct. 2053 (2015)........................................... 3, 4
In re Allapat,
33 F.3d 1526 (Fed. Cir. 1994) ................................. 17
In re Earle Industries, Inc.,
71 B.R. 919 (Bankr. E.D. Pa. 1987) ....................... 21
James v. Campbell,
104 U.S. 356 (1882)................................................... 4
vi

Kaiser Aetna v. United States,


444 U.S. 164 (1979)................................................. 14
Matal v. Tam,
137 S. Ct. 1744 (2017)............................................. 15
McClurg v. Kingsland,
42 U.S. 202 (1843)..................................................... 5
McCormick Harvesting Mach. Co. v. C. Aultman
& Co., 169 U.S. 606 (1898) ..............................passim
Morrison v. Olson,
487 U.S. 654 (1988)................................................. 20
Murrays Lessee v. Hoboken Land & Imp. Co.,
59 U.S. 272 (1855)............................................. 10, 12
N. Pipeline Const. Co. v. Marathon Pipe Line Co.,
458 U.S. 50 (1982)................................................... 11
Natl Fedn of Indep. Bus. v. Sebelius,
567 U.S. 519 (2012) ................................................. 28
Nidec Motor Corp. v. Zhongshan Broad Ocean Motor
Co., IPR201500762 (P.T.A.B. July 20, 2015) ....... 20
Pacemaker Diagnostic Clinic of America, Inc. v.
Instromedix, Inc., 725 F.2d 537 (9th Cir.)........ 24, 29
Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168
(Fed. Cir. 2017) ....................................................... 31
Precision Instrument Mfg. Co. v. Auto. Maint. Mach.
Co., 324 U.S. 806 (1945) ......................................... 13
Providence Rubber Co. v. Goodyear,
76 U.S. 788 (1869)..................................................... 4
vii

Russell v. Sebastian,
233 U.S. 195 (1914)................................................... 6
Seymour v. McCormick,
60 U.S. 96 (1856)....................................................... 4
Slidell v. Grandjean,
111 U. S. 412 (1884) .................................................. 6
Society for Propagation of Gospel in Foreign Parts v.
Town of New Haven,
21 U.S. (8 Wheat.) 464 (1823) .................................. 5
Stanley v. Hewitt,
22 Fed. Cas. 1043 (1836) .......................................... 7
Stern v. Marshall,
564 U.S. 462 (2011)................................................. 28
Target Corp. v. Destination Maternity Corp,
IPR201400508 (P.T.A.B. Sept. 20, 2014) ............. 20
Thomas v. Union Carbide Agr. Prod. Co.,
473 U.S. 568 (1985)........................................... 21, 25
United States v. Am. Bell Tel. Co.,
128 U.S. 315 (1888)................................................... 4
United States v. Palmer,
128 U.S. 262 (1888)................................................... 4
United States v. Will,
449 U.S. 200 (1980)................................................. 16
Wellness Intl Network, Ltd. v. Sharif,
135 S.Ct. 1932 (2015)......................................... 21-22
viii

Wright v. Nagle,
101 U.S. 791 (1879)................................................... 6

Constitutional Provisions
U.S. Const. art. I, 8, cl. 8 ......................................... 16

Statutes
5 U.S.C. 7521(a) ....................................................... 16
35 U.S.C. 261 ............................................................. 3
35 U.S.C. 6(a) ........................................................... 16
35 U.S.C. 311 ........................................................... 22
35 U.S.C. 312 ........................................................... 22
35 U.S.C. 313 ........................................................... 22
35 U.S.C. 314 ........................................................... 22
35 U.S.C. 314(d) ....................................................... 30
35 U.S.C. 315 ........................................................... 22
35 U.S.C. 315(c) ....................................................... 23
35 U.S.C. 315(e) ....................................................... 18
35 U.S.C. 316 ........................................................... 22
35 U.S.C. 317 ........................................................... 22
35 U.S.C. 318 ........................................................... 22
35 U.S.C. 319 ........................................................... 22
Act of Feb. 21, 1793, ch. 11, 10, 1 Stat. 318 .............. 7
ix

America Invents Act, Pub. L. No. 112-29, 125 Stat.


284 (2011), 35 U.S.C. 100 ................................ 2, 22
Patent Act of 1790, ch. 7, 1 Stat. 109 ...................... 3, 6
Patent Act of 1836, ch. 357, 7, 5 Stat. 117 ................. 8
Reorganization Act of 1945, ch. 582, 59 Stat. 613 .... 15
Tucker Act, 28 U.S.C. 1498 ..................................... 12

Rules
Ninth Circuit Rule 353 ............................................. 21

Other Authorities
157 Cong. Rec. S7413 (Nov. 14, 2011) ....................... 22
Alden Abbott, et al., Crippling the Innovation
Economy: Regulatory Overreach at the Patent
Office, Regulatory Transparency Project of the
Federalist Society, Aug. 14, 2017,
http://bit.ly/2x1b9cb ................................................ 31
Andrea J. Boyack, Limiting the Collective Right to
Exclude, 44 Fordham Urb. L.J. 451 (2017) ............ 14
Ashley Gold, et al., Lee Staying on as Patent Chief
under Trump Administration, Politico, Jan. 19,
2017, http://politi.co/2w8xGRT ............................... 18
Bruce Bugbee, Genesis Of American Patent and
Copyright Law (1967) ........................................ 15-16
Christopher Serkin, Public Entrenchment Through
Private Law: Binding Local Governments,
78 U. Chi. L. Rev. 879 (2011) ................................. 14
x

Craig E. Countryman, 2015 Patent Decisions of the


Federal Circuit, 65 Am. U. L. Rev. 769 (2016) ...... 24
David P. Currie, Bankruptcy Judges and the
Independent Judiciary,
16 Creighton L. Rev. 441 (1983)........................ 19-20
Gene Quinn, President Trump Must Pick a PTO
Director Who Believes Patents Are Private Property
Rights, IPWatchdog.com, June 28, 2017,
http://bit.ly/2w7SKI5 .............................................. 17
Gregory Dolin, Dubious Patent Reform,
56 B.C. L. Rev. 881 (2015) ................................ 10, 18
Gregory Dolin & Irina D. Manta, Taking Patents,
73 Wash. & Lee L. Rev. 719 (2016)................... 30-31
H.R. Rep. No. 11298 ................................................. 22
James Edwards, The Bottom Line on Trumps PTO:
Michelle Lee Must Go, IPWatchdog.com, Jan. 24,
2017, http://bit.ly/2w8vNEA ................................... 17
John Locke, Two Treatises of Government (1690) .... 15
John Redman Coxe, Of Patents,
1 Emporium Arts & Sci. 76 (1812) ........................... 7
Jonathan S. Masur, Patent Inflation,
121 Yale L. J. 470 (2011) .................................. 16, 17
Kent Barnett, Against Administrative Judges,
49 U.C. Davis L. Rev. 1643 (2016) ........................ 16
Letter from William Thornton, Superintendent,
U.S. Pat. Office, to Amos Eaton (May 5, 1809) ........ 7
xi

Letter to the President from Adobe Systems, et al.,


Apr. 25, 2017, http://bit.ly/2w8cGKX ..................... 18
Morgan Lewis, 2017 PTAB Digest: The Latest
Trends and Developments in PostGrant
Porceedings (2017) .................................................. 24
Natl Park Svc., Getting to Know the Homestead
Act, http://bit.ly/2w8dyz0 ................................... 12-13
Perdarm Semeni, Patexia Chart 31: Can Patents
Survive Multiple IPR Challenges? (Case Study),
http://bit.ly/2iGkosG ............................................... 19
PTAB, Standard Operating Procedure 1 (Rev. 14)
(2015) ....................................................................... 21
PTAB, Standard Operating Procedure 2 (Rev. 9)
(2014) ....................................................................... 19
Sarah Tran, Patent Powers,
25 Harv. J.L. & Tech. 609 (2012) ........................... 22
1

INTEREST OF AMICI CURIAE1


The Cato Institute is a nonpartisan public-policy
research foundation established in 1977 and dedicated
to advancing the principles of individual liberty, free
markets, and limited government. Catos Center for
Constitutional Studies helps restore the principles of
limited constitutional government that are the
foundation of liberty. Toward those ends, Cato
publishes books and studies, conducts conferences,
and produces the annual Cato Supreme Court Review.
The American Conservative Union
Foundation (ACUF) is a public-policy research
foundation established in 1983. ACUF seeks to
simplify complex issues and illustrate their practical
relevance to all Americans, demonstrating that
conservative ideas and principles work better to solve
the problems facing the United States. ACUFs
mission is to educate citizens about conservative
principles. Toward those ends, ACUF has built several
policy centers that publish writings by respected
thought leaders and organizes conferences where
conservative ideas are debated and promoted.
Amici have no direct stake in the outcome of the
present litigation. Instead, amici believe that private
property, in all its forms, is the bedrock for human
flourishing. This understanding of the importance of
private property leads amici to a simple proposition:
that litigants should be able to vindicate their federal
property rights in properly constituted federal courts.

1Rule 37 statement: Petitioner and Respondent Greenes Energy


Group, LLC have filed a general consent for all amicus briefs.
Respondent United States gave written consent to this filing. No
person or entity other than amici and their counsel authored this
brief in whole or in part, or funded its preparation or submission.
2

Furthermore, amici hold that our tripartite system of


government is the greatest bulwark for liberty and
that aggrandizing one of its pillars at the expense of
another will result in the erosion of citizens abilities
to protect against overbearing government.
Although amici-affiliated scholars may disagree on
certain legal and political issuesincluding the proper
scope of patent protectionamici have joined together
to urge the Court to reverse the decision below.
Regardless of which inventions are granted patents
and the strength of those patents, disputes over these
rights must be adjudicated by Article III courts.

SUMMARY OF ARGUMENT
In 2011, citing concerns about the high cost of
patent litigation and the supposed low quality of
patents, Congress, instead of providing additional
funds to the Patent Office to improve its work, created
a mechanism for administrative patent cancellation.
See America Invents Act (AIA), Pub. L. No. 112-29,
125 Stat. 284 (2011), 35 U.S.C. 100, et seq. The AIAs
post-issuance review system is fundamentally unfair
to litigants and has severely undermined and
degraded property rights in patents. Further, these
procedures have deprived the federal courts of their
power and authority to adjudicate federal rights and
to enforce their own judgments.
In upholding these administrative cancellation
proceedings, the Federal Circuit ignored the historical
understanding of the nature of patent rights, ignored
a long line of precedents that have consistently held
that only federal courts can abrogate an issued patent,
and badly misapplied the doctrine of public rights.
The decision below must not be allowed to stand.
3

Instead, this Court should reaffirm that patents for


inventions areand have always been treated asno
different than patents in land and though both derive
from federal statutes, neither are public rights
susceptible to adjudication in non-Article III courts. By
looking closely at the post-issuance proceedings, the
Court will be able to appreciate that they are unfair to
the litigants and wreak havoc on the delicate balance
of powers between the three branches of government.
Nor are these defects rectified by the ability to appeal
the Patent Offices decisions to the federal courts, for
the avenues of appeal are flawed and inadequate.

ARGUMENT
I. Patents Are Property and Must Be Treated
as Such
From the early days of the Republic there has been
an unbroken line of cases reaffirming, time and again,
that patents for inventions are private property and
stand on the same constitutional footing as land. This
principle has been reaffirmed just three terms ago in
Horne v. U. S. Dept of Agriculture, 133 S. Ct. 2053
(2015). This basic proposition also finds unequivocal
support in the Patent Act. See 35 U.S.C. 261. The
debasement of patent rights inherent in the system
that forces patentees to continuously defend their
private property in front of government bureaucrats
finds support neither in historical understanding of
patent rights nor the precedents of this Court.
A. Patents Have Historically Been
Understood to Be the Patent Holders
Private Property
Since the Patent Act of 1790, ch. 7, 1 Stat. 109,
Congress has experimented with a variety of
4

procedures for the granting of patents. Yet, through all


of the changes in patent law, one principle stood
constant: a patent, once granted, was private property
of the inventor on par with land. Horne, 135 S. Ct. at
2427; McCormick Harvesting Mach. Co. v. C. Aultman
& Co., 169 U.S. 606, 609 (1898); United States v.
Palmer, 128 U.S. 262, 271 (1888); United States v. Am.
Bell Tel. Co., 128 U.S. 315, 368 (1888); James v.
Campbell, 104 U.S. 356, 358 (1882); Providence
Rubber Co. v. Goodyear, 76 U.S. 788, 798 (1869);
Seymour v. McCormick, 60 U.S. 96, 102 (1856) (all
concluding that patents for inventions and patents for
land stand on equal footing). As early as 1813, Chief
Justice Marshall, riding circuit, explained that a
patent is not mere favor, but a method to secure and
perfect an antecedent right to property, a right that is
inherent in the Constitution itself:
The constitution and law, taken together, give
to the inventor, from the moment of invention,
an inchoate property therein, which is
completed by suing out a patent. This inchoate
right is exclusive. It can be invaded or impaired
by no person. No person can, without the
consent of the inventor, acquire a property in
the invention. . . . [T]his inchoate and
indefeasible property in the thing discovered
commences with the discovery itself, and is only
perfected by the patent subjecting the future
use of the machine constructed previous to a
patent, to that price which the inventor
demands from others for the use of it, his
discovery will not appear to be one of those
violent invasions of the sacred rights of
property, which would justify a court in
disregarding the plain meaning of words. . . .
5

The inchoate property which vested by the


discovery, is prolonged by the renewed patent,
as well as by the original patent.
Evans v. Jordan, 8 F. Cas. 872, 873 (C.C.D. Va. 1813),
affd, 13 U.S. 199 (1815). In other words, the property
right is grounded in the work of the inventor, with the
Patent Act serving only to make that right legally
enforceable. See also Gayler v. Wilder, 51 U.S. 477, 493
(1850) (Taney, C.J.) ([T]he discoverer of a new and
useful improvement is vested by law with an inchoate
right to its exclusive use, which he may perfect and
make absolute by proceeding in the manner which the
law requires.).
Perhaps the clearest example of patents being
treated on par with other property is McClurg v.
Kingsland, 42 U.S. 202 (1843). Addressing the effect of
amendments to the Patent Act on the rights of those
whose patents issued under the statute previously in
force the McClurg Court held that the amendments
can have no effect to impair the right of property then
existing in a patentee, or his assignee, according to the
well-established principles of this court in 8 Wheat.
493. The reference to Society for Propagation of
Gospel in Foreign Parts v. Town of New Haven, 21 U.S.
(8 Wheat.) 464, 493 (1823) is particularly noteworthy
because that case had nothing to do with patents,
being a dispute about land ownership. The principle
announced in Society for Propagation of Gospelthat
of legislatures inability to derogate from vested land
titleswas made equally applicable to patents,
showing that the early courts drew no difference
6

between the status of patents and of more tangible


property.2
B. The Power to Adjudicate Patent Rights
Has Always Been Committed
Exclusively to the Judicial Branch
None of this is to say that Congress was ever blind
to the possibility that patents may issue in error and
to those who have not earned and therefore are not
deserving of them. On the contrary, being acutely
aware of such a risk, beginning with the very first
Patent Act, Congress provided for cancellation of
patents issued in error and conferred the exclusive
power to do so on federal judges. See Act of Apr. 10,
1790, ch. 7, 5, 1 Stat. 109, 111. This system was

2 Much is often made of early judicial pronouncements that


patents are franchises, and therefore cannot stand on equal
footing with other property rights. This is incorrect and betrays
lack of historical understanding and failure of careful reading of
the precedents. Suffice it to say that unlike patents, public
franchises are judicially disfavored, see Wright v. Nagle, 101 U.S.
791, 796 (1879), and public grants are . . . construed strictly in
favor of the public [with the] ambiguities . . . resolved against the
grantee. Russell v. Sebastian, 233 U.S. 195, 205 (1914) (citing,
inter alia, Charles River Bridge v. Warren Bridge, 36 U.S. 420,
546 (1837); Slidell v. Grandjean, 111 U. S. 412, 437 (1884); Detroit
Citizens Street R. Co. v. Detroit R. Co., 171 U. S. 48, 54 (1898)).
In contrast, courts have long understood that
Patents for inventions are not to be treated as mere
monopolies odious in the eyes of the law, and therefore
not to be favored; nor are they to be construed with the
utmost rigor, as strictissimi juris. . . . Hence, it has
always been the course of the American courts . . . to
construe these patents fairly and liberally, and not to
subject them to any overnice and critical refinements.
Ames v. Howard, 1 F. Cas. 755, 756 (C.C.D. Mass. 1833)
(Story, Circuit Justice).
7

preserved in the Patent Act of 1793. Act of Feb. 21,


1793, ch. 11, 10, 1 Stat. 318, 323. The exclusivity of
judicial cancellation is particularly noteworthy,
because the under the 1793 Act there was no ex ante
examination of patent validity. See Stanley v. Hewitt,
22 Fed. Cas. 1043, 1044 (1836) (It is a wellknown
fact that patents are granted at the patent office, not
after an examination into their merits, but upon ex
parte statements.).
It is entirely unsurprising that in a system where a
filing of a petition was all that was necessary to obtain
a patent, many of the patents [were] useless, except
to give work to the lawyers, & others so useless in
construction as to be . . . merely intended for sale.
Letter from William Thornton, Superintendent, U.S.
Patent Office, to Amos Eaton (May 5, 1809). In fact,
inventors themselves conceded that a great number
of patents annually granted by the United States . . .
would not be capable of sustaining a just claim for the
exclusive privileges acquired; and [that] the public is
really injured under such circumstances. John
Redman Coxe, Of Patents, 1 Emporium Arts & Sci. 76,
76 (1812). Despite the frustration with the system, and
its obvious shortcomings, this Court was adamant that
a patent, once granted, was a property right like any
other, and not subject to summary cancellation
proceedings. Speaking for a unanimous Court, Justice
Story wrote that
It is not lightly to be presumed, therefore, that
Congress, in a class of cases placed peculiarly
within its patronage and protection, involving
some of the dearest and most valuable rights
which society acknowledges, and the
constitution itself means to favour, would
8

institute a new and summary process, which


should finally adjudge upon those rights,
without a trial by jury, without a right of
appeal, and without any of those guards with
which, in equity suits, it has fenced round the
general administration of justice.
Ex Parte Wood & Brundage, 22 U.S. 603, 608 (1824).
Congress eventually abandoned the patent-
registration system in favor of a system where
applications would be examined by executive-branch
officials and would be granted only upon showing that
the claimed invention was novel and useful. See Patent
Act of 1836, ch. 357, 7, 5 Stat. 117, 119. Nonetheless,
even as the executive branch was vested with
significantly more authority to decide whether or not
to issue a patent, the courts continued to hold that the
power to cancel an issued patent rested exclusively
with the judicial branch. Instructing a jury in an 1862
case, Judge Sprague stated [a] . . . valid patent . . . is
just as sacred as any right of property, and no more so;
and questions respecting it are to be tried in a court of
justice in the same manner as all other rights which
may have been infringed. Hayden v. Suffolk Mfg. Co.,
11 F. Cas. 900, 902 (C.C.D. Mass. 1862), affd sub nom.
Suffolk Co. v. Hayden, 70 U.S. 315 (1865).
As was expected, the practice of examining patent
application resulted in the Patent Office acquiring
expertise both in the matters of patent law and various
fields of technology. Notwithstanding this expertise,
this Court, in McCormick Harvesting, held that the
Patent Office cannot abrogate or otherwise detract
from an issued patent. 169 U.S. at 60809. At issue
was the effect of Patent Offices rejection of a petition
for a reissue patent. In order to obtain a reissue (the
9

purpose of which is to correct inadvertent mistakes


that if left standing, would render the patent wholly
or partly inoperative or invalid), the patentee had to
convince the Patent Office that the sought reissue
complied with the requirements for patentability. The
question before the Court was whether a rejection for
want of novelty of claims in a reissue application
invalidated the claims in the original patent to the
extent there was no material difference between the
two sets of claims. The Courts decision leaves no doubt
about respective powers and duties of each branch.
Holding that the original patent is unaffected by any
decision on a reissue application, the Court observed
that
It has been settled by repeated decisions of this
court that when a patent has received the
signature of the secretary of the interior,
countersigned by the commissioner of patents,
and has had affixed to it the seal of the patent
office, it has passed beyond the control and
jurisdiction of that office, and is not subject to
be revoked or canceled by the president, or any
other officer of the government. It has become
the property of the patentee, and as such is
entitled to the same legal protection as other
property.
The only authority competent to set a patent
aside, or to annul it, or to correct it for any
reason whatever, is vested in the courts of the
United States, and not in the department which
issued the patent.
McCormick, 169 U.S. at 60809 (emphasis added;
internal citations omitted).
10

For over 220 years, under various iterations of


patent laws, and despite the perpetual critique of low
quality patents, see generally Gregory Dolin, Dubious
Patent Reform, 56 B.C. L. Rev. 881, 88695 (2015), two
things remained constant: the treatment of patents as
property rights and the commitment of dispute
resolution over these rights to Article III courts. The
AIA is flatly inconsistent with the historical
understanding of patent rights and the repeated
decisions of this court. McCormick, 169 U.S. at 608.
C. Patent Rights Are Private Rights and
Must Be Adjudicated in Federal Courts
It is undisputed that the Constitution permits
Congress to assign resolution of certain matters to
courts that do not enjoy the protections of Article III.
See, e.g., Atlas Roofing Co. v. Occupational Safety &
Health Review Commn, 430 U.S. 442, 455 (1977). At
the same time, the universe of such cases is carefully
circumscribed. See Granfinanciera, S.A. v. Nordberg,
492 U.S. 33, 5155 (1989). In separating issues
amenable to adjudication in legislative tribunals from
those that are within the exclusive province of Article
III courts, this Court has drawn a distinction between
public rights and private rights. Id. The distinction
is of paramount importance because [u]nless a legal
cause of action involves public rights, Congress may
not deprive parties litigating over such a right of the
Seventh Amendments guarantee to a jury trial.3 Id.

3 Congress may assign the matters sounding in equity to courts


of equity sitting without juries, 492 U.S. at 53; however,
[C]ongress [may not] withdraw from judicial cognizance any
matter which, from its nature, is the subject of a suit . . . in
equity. Murrays Lessee v. Hoboken Land & Imp. Co., 59 U.S.
272, 284 (1855).
11

at 53. Conversely, if the right in question is not a


public right for Article III purposes, then Congress
may not assign its adjudication to a specialized non
Article III court lacking the essential attributes of the
judicial power. Id. (quoting Crowell v. Benson, 285
U.S. 22, 51 (1932)). Although the distinction between
public rights and private rights has not been
definitively explained in [this Courts] precedents, N.
Pipeline Const. Co. v. Marathon Pipe Line Co., 458 U.S.
50, 69 (1982), there is little doubt that patent rights
are quintessentially private rights and thus may not
be assigned for adjudication to non-Article III courts.
Public rights generally fall into one of two
categories. The first category are cases arising
between the government and others. Ex parte
Bakelite Corp., 279 U.S. 438, 451 (1929). Before the
government may be sued, it must consent to waive its
sovereign immunity. See Murrays Lessee, 59 U.S. at
273. Because the United States . . . may yield this
consent upon such terms and under such restrictions
as it may think just, id., the government may insist
that suits against it proceed in non-Article III courts.
Next, where Congress has created a new cause of
action, and remedies therefor, unknown to the
common law, the rights created by such statutory
schemes may also be considered public rights
amenable to resolution outside of Article III strictures.
See Atlas Roofing, 430 U.S. at 461. On the other hand,
Congress lacks the power to strip parties contesting
matters of private right, Granfinanciera, 492 U.S. at
5152, including [w]holly private tort, contract, and
property cases, Atlas Roofing, 430 U.S. at 458, from
their right to trial before an Article III court. The
Constitution nowhere grants Congress [the] puissant
12

authority . . . [to] conjure away the Seventh


Amendment by mandating that traditional legal
claims be brought there or taken to an administrative
tribunal. 492 U.S. at 52.
Patent rights do not fit into either of the recognized
public rights categories. Patent disputes arise
between private parties rather than the government
and a private party.4 Actions before the Patent Trial
and Appeal Board (PTAB), like actions in district
courts, are disputes between private parties.5 Nor are
patents a creature of federal regulatory statutes.
Atlas Roofing, 430 U.S. at 460. That patent rights exist
solely as a result of the Patent Act is not disputed, but
neither is that fact particularly informative.
First, patents for inventions are not the only
property rights that exist solely by virtue of
Congressional grant. According to the National Park
Service, private property in 10 percent of all the land
in the United States, spread across 30 states, exists
solely by virtue of the Homestead Act. Natl Park Svc.,
Getting to Know the Homestead Act,

4 When the federal government is accused of patent infringement,


the patentee must bring suit in the Court of Federal Claims, an
Article I tribunal. See Tucker Act, 28 U.S.C. 1498. In light of the
well-settled principles of sovereign immunity, amici have no
quarrel with this rule. See Murrays Lessee, 59 U.S. at 273.
5 This feature separates the AIA inter partes review from the

previously existing patent reexamination. Under the previous


regime, the dispute was always between the government and the
patentee. The patentee was permitted to continue negotiating
the scope of his patent with the government and to file
amendments until such time that the Patent Offices objections
were resolved. In contrast, the new inter partes review is an
adjudicative and adversarial process, where the traditional
features of patent examination are entirely absent and which was
designed to provide an alternative to private litigation.
13

http://bit.ly/2w8dyz0. The land patents received under


the Homestead Act, are nearly a mirror image of
patents received under the Patent Act. While the
Homestead Act was in effect, settlers found empty lots
of land, worked the land for five years, and then filed
an application for a patent from the federal
government. Id. In other words, settlers found land
that wasnt known to others before, made it into a new
and useful farmland, and upon disclosure of their
efforts received, pursuant to a statute, a document
that allowed them to exclude all others from the land
which the settlers made theirs. The process for
obtaining a patent for invention is strikingly similar.
An inventor discovers an idea not previously known to
others, develops that idea into a new and useful
invention, and upon the disclosure of that invention,
receives pursuant to a statute, a document that allows
him to exclude others from working his invention. This
Court has previously recognized the equivalence
between the two types of patents.
A patent for an invention is as much property
as a patent for land. The right rests on the same
foundation, and is surrounded and protected by
the same sanctions. There is a like larger
domain held in ownership by the public.
Neither an individual nor the public can trench
upon or appropriate what belongs to the other.
Consol. Fruit-Jar Co. v. Wright, 94 U.S. 92, 96 (1876).
Second, although [a] patent by its very nature is
affected with a public interest, Precision Instrument
Mfg. Co. v. Auto. Maint. Mach. Co., 324 U.S. 806, 816
(1945), it does not make it a public right. All private
property rights are affected with a public interest.
Ownership of private property necessarily includes the
14

ability to bar others from that property (no matter how


valuable the right of access may be). See Kaiser Aetna
v. United States, 444 U.S. 164, 17680 (1979).
Covenants in deeds that restrict property holders from
building multifamily dwellings necessarily affect
public interest because they may limit the publics
ability to build affordable housing in certain locales.
See Andrea J. Boyack, Limiting the Collective Right to
Exclude, 44 Fordham Urb. L.J. 451, 486 (2017).
Defeasible interests in property affect public interest
because they limit the uses to which a property can be
put, even when such uses would offer significant
benefits to the community. See Christopher Serkin,
Public Entrenchment Through Private Law: Binding
Local Governments, 78 U. Chi. L. Rev. 879, 902 (2011).
None of these reasons, however, have ever been
sufficient to conclude that property rights are
anything but private rights. The Court should
adhere to its unbroken string of precedents treating
patents for inventions in pari materia with land, see
ante at pp. 45, and abjure creating a peculiarly
unfavorable regime for some of the dearest and most
valuable rights which society acknowledges, and the
constitution itself means to favour. Ex Parte Wood, 22
U. S. at 608.
Ultimately, the implications of the argument that
merely because a right to particular property flows
from a statutory scheme, such rights are public
rights and that disputes over them can be withdrawn
from Article III courts are staggering. Such a
conclusion would mean that anyone who derives his
land title from the Homestead Act can be forced to
have any disputes over that property be resolved by a
15

bureaucrat in the Bureau of Land Management.6


Under this view, Congress could require that a dispute
between an individual and a private financial
institution over a mortgage or a student loan be heard
before an official in the Treasure Department on the
theory that the relevant loans were made pursuant to
a federal statutory scheme. The government enacts
statutes affecting property rights all the time, but that
does not convert the rights that trace their roots to
such statutes into public rights. As John Locke
explained, we enter into society with others for the
securing and regulating of property, and consent for
our property to be regulated by the laws of the
society. John Locke, Two Treatises of Government
120 (1690). But the government and laws exist not to
create property but so that men might have and
secure their properties. Id. 139 (emphasis added).
The Patent Act, much like the Homestead Act, does not
create property rights in the invention or land, but
merely allows individuals to perfect and secure these
previously inchoate right.7 Evans v. Jordan, 8 F. Cas.
at 873.

6 The BLM is the successor agency to the General Land Office


which was charged with administering the Homestead Act. See
Reorganization Act of 1945, ch. 582, 59 Stat. 613.
7 In Matal v. Tam, decided just last term, the Court held that

federal law does not create trademarks. Trademarks and their


precursors have ancient origins, and trademarks were protected
at common law and in equity at the time of the founding of our
country. 137 S. Ct. 1744, 1751 (2017), Federal law merely
secured these rights. That presently trademark protection is
statutory did not convert otherwise private speech into public
speech. Id. at 1760. Patents for inventions are no different.
Patents (like trademarks) existed before 1787 (being granted by
state and colonial governments), see Bruce Bugbee, Genesis of
American Patent and Copyright Law 57103 (1967), and the
16

If public right were come to mean any right that


is anchored in a statutory enactment, then no right to
property or contract would be safe from being
committed for constant reevaluation to administrative
agencies. The exception to the general requirement of
having disputes adjudicated in Article III courts would
swallow the rule. The Constitution cannot tolerate
such a result.

II. The PTAB Is Incompatible with the


Fundamental Purpose of Article III
A. The PTAB Undermines Litigants Rights
to Have Cases Fairly Adjudicated
The fundamental purpose of Article III is to
safeguard litigants right to have claims decided
before judges who are free from potential domination
by other branches of government. Commodity
Futures Trading Commn v. Schor, 478 U.S. 833, 848
(1986) (quoting United States v. Will, 449 U.S. 200, 218
(1980)). The PTAB both in design and in practice fails
this basic requirement.
The Administrative Patent Judges (APJ) lack the
independence of Article III judges, or even
administrative law judges.8 Instead, they (and their

Constitution itself contemplates that Congress will be acting to


secure, rather that create inventors rights. See Art. I, 8, cl. 8.
8 ALJs act independently of the agency and can be removed or

otherwise sanctioned only or good cause established and


determined by the Merit Systems Protection Board on the record
after opportunity for hearing before the Board. 5 U.S.C.
7521(a); see Kent Barnett, Against Administrative Judges, 49
U.C. Davis L. Rev. 1643, 165456 (2016). In contrast, APJs are
fully under the control of the PTO director and serve at his
pleasure. See Jonathan S. Masur, Patent Inflation, 121 Yale L. J.
470, 496 n.106 (2011) (citing 35 U.S.C. 6(a)).
17

decisions) are wholly dependent on the predilections of


the director of the Patent and Trademark Office (PTO).
Masur, supra, at 496 n.106. Indeed, the ultimate
determination on any issue litigated before the PTAB
de facto rests with the director. Id. As the Federal
Circuit noted in In re Allapat, although the director
cannot personally change a determination of a PTAB
panel, he may convene a Board panel which he knows
or hopes will render the decision he desires, even upon
rehearing. 33 F.3d 1526, 1535 (Fed. Cir. 1994)),
overruled on other grounds by Bilski v. Kappos, 561
U.S. 593 (2010).
The director of the PTO is, of course a political
appointee subject to Senate confirmation and serving
at the pleasure of the president. The operation of the
PTAB and the security of patent rights therefore
depends not on stable and neutral adjudication as is
the case in Article III courts, but on the prevailing
political winds. That this is so is illustrated by the
public debates surrounding the leadership of the PTO
following the most recent presidential election.
After President Trumps inauguration, a number of
individuals and groups urged him to replace Director
Michelle K. Lee with someone of his own choosing. See,
e.g., James Edwards, The Bottom Line on Trumps
PTO: Michelle Lee Must Go, IPWatchdog.com, Jan. 24,
2017, http://bit.ly/2w8vNEA. The president was
lobbied to appoint someone with radically different
attitude toward IPRs than that espoused by former
Director Lee. See, e.g., Gene Quinn, President Trump
Must Pick a PTO Director Who Believes Patents are
Private Property Rights, IPWatchdog.com (June 28,
2017), http://bit.ly/2w7SKI5. At the same time, former
director Lee (or at least her policies) have their
18

defenders in both the government and private sector.


See, e.g., Letter to the President from Adobe Systems,
et al., (Apr. 25, 2017), http://bit.ly/2w8cGKX; Ashley
Gold, et al., Lee Staying on as Patent Chief under
Trump Administration, Politico, Jan. 19, 2017,
http://politi.co/2w8xGRT. This ongoing debate is
ultimately not about any personalities or competency
to do the job of the PTO director. The debate is about
the workings of the PTAB.
It is certainly true that each incoming
administration seeks to harmonize the administrative
state with its own political and policy goals. The PTO
is no different. What is different is that in no other
agency does such harmonization affect vested property
rights. Changes in other agencies happen as part of
regular rulemaking process, subject to the
Administrative Procedure Act, apply globally to all
those regulated by the relevant agencies, and perhaps
most importantly do not change the scope of private
property rights. The changes in the leadership of the
PTO, on the other hand, can affect private property
rights in patents, can occur without any rulemaking,
and can apply just to a selection of favored (or
disfavored) patents.
Neither the AIA nor PTO rules limit the number of
times a patent can be subjected to inter partes review.
35 U.S.C. 315(e) (limited estoppel provision); see also
Cepheid v. Roche Molecular Sys., Inc., IPR2015
00881, Paper No. 9, at 2, 58 (P.T.A.B. Sept. 17, 2015)
(instituting inter partes review after previous request
by the same challenger was denied). Since the creation
of this process, patents have been routinely reviewed
on multiple occasions, see Dolin, supra, at 928, with
some having more than 125 separate petitions filed
19

against them. Perdarm Semeni, Patexia Chart 31: Can


Patents Survive Multiple IPR Challenges? (Case
Study), http://bit.ly/2iGkosG. Because a decision of one
PTAB panel does not bind another one, surviving one
review provides no armor against subsequent
challenges. PTAB, Standard Operating Procedure 2
(Rev. 9), VI.A (2014) (Every Board opinion is, by
default, a routine opinion until it is designated as
precedential or informative. . . . A routine opinion is
not binding authority.).
Thus, a PTO director (or for that matter a
president) intent on invalidating a particular patent
can continue ordering more and more inter partes
reviews until the desired outcome is achieved. Hence,
a patent that may have survived review (and
litigation) during one presidential administration
could be re-evaluated and invalidated as soon as a new
president is inaugurated and his choice for the PTO
director is confirmed. Such a process can take place not
because of any change in the substantive law, but
merely because the political powers wish to abrogate a
particular patent.9 Article III, 1, was designed as a
protection for the parties from the risk of legislative or
executive pressure on judicial decision. Schor, 478
U.S. at 848 (quoting David P. Currie, Bankruptcy
Judges and the Independent Judiciary, 16 Creighton

9 The reverse scenario, where a previously invalidated patent is


revived is harder, but not impossible, to craft simply because once
a patent is invalidated, it remains invalid for all times. See
Blonder-Tongue Labs., Inc. v. Univ. of Illinois Found., 402 U.S.
313, 34750 (1971). However, if time for a rehearing has not
expired, then a newly appointed PTO director could convene a
PTAB panel that would reach a more favorable decision.
20

L. Rev. 441, 460 n.108 (1983)). The PTAB, on the other


hand is designed to expose parties to just such a risk.
The executive pressure on judicial decision is not
merely a risk that must be discerned by a careful and
perceptive analysis. Morrison v. Olson, 487 U.S. 654,
699 (1988) (Scalia, J., dissenting). Instead, the
experience and the actual practice before the PTAB
over the last six years shows that this wolf comes as
a wolf. Id. For example, in Nidec Motor Corp. v.
Zhongshan Broad Ocean Motor Co., a three-judge
panel rejected a motion to add a new petition raising
new grounds of invalidity to an already pending inter
partes review. IPR201500762, Paper No. 12 (P.T.A.B.
July 20, 2015). Unsatisfied with that result, the
director granted a rehearing, added two additional
judges to the panel, and turned a previous 2-1 decision
in favor of the patentee into a 3-2 decision in favor of
the challenger. Id., Paper No. 16 (Oct. 16, 2015). The
expanded panel then proceeded to find all of the
challenged claims to be invalid. An even more
egregious case is Target Corp. v. Destination Maternity
Corp. There, an already expanded (five-member)
PTAB panel declined to institute inter partes review,
or to join the petition to an existing case brought by
the same party. IPR201400508, Paper Nos. 18, 20
(P.T.A.B. Sept. 20, 2014). The director was once again
unsatisfied with the decision and once again added two
additional members to the panel to turn a 3-2 pro
patentee decision into a 4-3 pro-challenger decision.
Id., Paper Nos. 31, 32 (Feb. 12, 2015).10

10The PTOs expanded-panel practice is quite unlike the circuit


courts en banc practice. When a circuit court orders that a case
be reheard en banc, all of the courts judges hear the appeal. Even
in the Ninth Circuit, where the en banc process involves merely
21

A process where a presidential political appointee


can select adjudicators in such a way as to ensure a
preordained outcome is the antithesis of a process
where claims [are] decided before judges who are free
from potential domination by political actors. Schor,
478 U.S. at 848. The very purpose of Article III is to
insure fairness to all litigants. In re Earle Industries,
Inc., 71 B.R. 919, 923 (Bankr. E.D. Pa. 1987). This
purpose is undermined by the system which allows
private property rights and the litigation position of
the parties to be wholly dependent on the predilections
of executive branch officials.
B. The PTAB Undermines the Role of the
Courts in Our Tripartite System of
Government
Article III protects not just litigants, but the role
of the independent judiciary within the constitutional
scheme of tripartite government. Schor, 478 U.S. at
848 (quoting Thomas v. Union Carbide Agr. Prod. Co.,
473 U.S. 568, 583 (1985)). It serves a structural
purpose, barring congressional attempts to transfer
jurisdiction [to non-Article III tribunals] for the
purpose of emasculating constitutional courts and
thereby prevent[ing] the encroachment or
aggrandizement of one branch at the expense of the
other. Wellness Intl Network, Ltd. v. Sharif, 135 S.Ct.

an expanded panel rather than all of the courts judges, the


judges are selected at random, precisely to assure fairness to the
litigants. See Ninth Circuit Rule 353. In contrast, the PTOs own
Standard Operating Procedures confirm the directors unfettered
authority to decide when to seat an expanded panel, how many
APJs to allocate to such a panel, and which specific individuals to
assign to hear the case. See PTAB, Standard Operating Procedure
1 (Rev. 14) (2015). The process seems designed to let the PTO
reach whatever decision it wishes, not one commanded by law.
22

1932, 1944 (2015) (quoting Schor, 478 U.S. at 850)


(alterations in original). The PTAB, however, was
explicitly designed to diminish the power of federal
courts and aggrandize the executive branch.
The Judiciary Committee report that accompanied
the America Invents Act did not hide the fact that the
PTAB proceedings were designed to serve as an
effective and efficient alternative to often costly and
protracted district court litigation. H.R. Rep. No. 112
98, at 45 (emphasis added); see also Sarah Tran, Patent
Powers, 25 Harv. J.L. & Tech. 609, 632 (2012) (An
interesting feature of USPTOs new postgrant
reviews, as well as other proceedings, is that they
function as an alternative, not an outright
replacement, to litigation in court.). During the
debate on the bill, Senator Kyl stated that [t]here
really is no sense in allowing expensive litigation over
patents that are no longer valid given the evolution of
the law.11 157 Cong. Rec. S7413 (Nov. 14, 2011).
The AIAs provisions governing IPRs confirm that
the Act is an attempt[] to transfer jurisdiction [to non-
Article III tribunals] for the purpose of emasculating
constitutional courts. Wellness Intl, 135 S.Ct. at 1944
(alterations in original). The AIA permits an accused
infringer to both avoid district court adjudication of a
pending suit (provided that he files a petition within
one year of being sued), and to vitiate a prior final
judgment of a patents validity, even if rendered by
this Court. Under the AIA, such judicial

11Although Sen. Kyls statements focused on Covered Business


Method Review provision of the AIA, 157 Cong. Rec. S7413, that
provision is closely related to inter partes review provision and
suffers from the same constitutional infirmity. Compare 35
U.S.C. 311319, with AIA, 18(d)(1), 125 Stat. 284, 331.
23

determinations have no preclusive effect on the PTO


or the adjudged infringer.12 The inter partes review
process makes final judgments of federal courts always
subject to revision and modification by the executive
branch. However, [s]uch revision and control [of
judicial decisions is] radically inconsistent with the
independence of that judicial power which is vested in
the courts. Case of Hayburn, 2 U.S. 408, 410 (1792).
In essence, the inter partes process reduces judicial
determinations of patent validity to little more than
advisory, nonfinal opinions. It emasculat[es]
constitutional courts by making their judgment[s] . .
. inoperative and nugatory, leaving the aggrieved
party without a remedy. Gordon v. United States, 69
U.S. 561, 561 (1864). Judicial determination of patent
validity is now too often merely an opinion, which . . .
remain[s] a dead letter, and without any operation
upon the rights of the parties, unless reaffirmed by
the PTAB during an inter partes review. Id.
The AIAs stay provisions applicable to inter partes
review lend further support to the proposition that the
purpose of postgrant proceedings was to
emasculat[e] constitutional courts while
aggrandiz[ing the executive] branch at the expense of
the judiciary. For example, section 315(a) provides for
an automatic stay of a district court action challenging
the validity of a patent, thus depriving the federal
courts of ability to adjudicate declaratory judgment
actions when the same patent claims are concurrently
challenged before the PTO. And although the AIA does

12While an accused infringer cannot initiate inter partes review


more than a year after being sued, should another challenger file
a petition, he may seek to join its otherwise untimely petition to
the newly filed one. 35 U.S.C. 315(c).
24

not require an automatic stay of co-pending patent


infringement suits (unlike the required automatic stay
of declaratory judgment actions), the district courts
have heard the congressional call for shifting patent
disputes to the administrative agency loud and clear.
Studies show that once the PTAB decides to institute
an inter partes review, district courts stay their
proceedings over 70 percent of the time. See Morgan
Lewis, 2017 PTAB Digest: The Latest Trends and
Developments in Post-Grant Proceedings at 26 (2017).
In fact, more often than not, courts stay litigation on
the mere filing of an inter partes review petition. Id.
The PTABs final written decisions invalidating
[patent] claims [have] come to replace summary
judgment and post-trial decisions rendered by Article
III courts. Craig E. Countryman, 2015 Patent
Decisions of the Federal Circuit, 65 Am. U. L. Rev. 769,
833 (2016). The end result is that federal courts have
been essentially deprived of their responsibility for
adjudicating patent cases and determining the scope
of these property rights, while the role of the executive
branch has been correspondingly enlarged. Courts
have never approved such an arrangement. Cf.
Pacemaker Diagnostic Clinic of America, Inc. v.
Instromedix, Inc., 725 F.2d 537, 54446 (9th Cir.) (en
banc) (Kennedy, J.) (approving the use of magistrate
judges to conduct civil trials, including patent cases,
only because Article III courts control the magistrate
system as a whole.).

III. The PTABs Powers Are Too Broad and the


Judicial Review Too Circumscribed to
Survive Under this Courts Precedents
It is well settled that that Congress is not barred
from acting pursuant to its powers under Article I to
25

vest decisionmaking authority in tribunals that lack


the attributes of Article III courts. Thomas, 473 U.S.
at 583. At the same time, delegation of adjudicative
functions to Article I tribunals is subject to strict limits
and the availability of meaningful review in Article III
courts. The procedures before the PTAB satisfy neither
of these requirements.
A. The PTAB Exercises Powers Beyond
Anything Previously Endorsed by this
Court
This Court has, in certain contexts, permitted
Congress to assign certain adjudicative functions to
administrative agencies or other decisionmakers who
do not enjoy constitutional protections bestowed upon
federal judges. However, the survival of such schemes
has always depended on a) the type of right being at
issue, and b) the scope of administrative adjudication.
Thus, in Thomas, this Court approved
administrative agency adjudication of a right to data
exclusivity with regard to certain pesticide products.
While data exclusivity is in a sense a property right,
in Thomas it was part and parcel of a complex
regulatory scheme. The key to the Thomas decision is
the understanding that there is no right to sell
pesticides absent regulatory approval for the same. It
is unremarkable that the right to sell pesticides was
simply conditioned on having disputes about data-
sharing resolved by the very agency that was charged
with administering the overall regulatory scheme.
Similarly, in Atlas Roofing, the Court permitted an
agency to adjudicate the violation of its own
regulations and to determine whether those
regulations were violated. Again though, the agency
26

was able to assert its powers solely because there was


(and is) no underlying right to engage in a particular
type of business activity without any governmental
regulation. Voluntarily engaging in a particular type
of regulated activity was what brought the petitioner
in Atlas Roofing within the jurisdiction of the
Occupational Safety and Health Administration.
Much the same can be said for Crowell, where this
Court permitted an administrative agency to
adjudicate a workmens compensation scheme
including adjudicating the amounts due from an
employer operating upon the navigable waters of the
United States. 285 U.S. at 22. Once again, because
operating a business within the waters of the United
States is not a right, it is subject to the regulations and
restrictions that the government may prescribe for the
operation of such an enterpriseincluding the
condition that certain disputes be resolved by a
regulatory agency.
In short, all of these cases stand for the
unremarkable proposition that when regulation of an
activity is permissible, it may come along with both
rule promulgation power and the rule enforcement
power. See Block v. Hirsh, 256 U.S. 135, 158 (1921) (If
the power of [an agency] established by the statute to
regulate the [economic activity] is established this
objection [to agency adjudication] amounts to little. To
regulate the [economic activity] and to decide the facts
affecting it are hardly separable.).
The Court has also permitted administrative
agencies to adjudicate matters that would not
themselves be entwined with a regulated activity.
However, such an extension of jurisdiction was always
limited to claims arising out of the same nucleus of
27

operative facts, and required either express or implied


consent of all of the parties to the proceedings. In
Schor, this Court upheld, against an Article III
challenge, the ability of the Commodity Futures
Trading Commission to adjudicate state-law
counterclaims, even though such matters are
traditionally reserved to the federal courts. The Court
noted that the petitioner waived his rights to have the
counterclaims adjudicated in an Article III court
because he elect[ed] to forgo his right to proceed in
state or federal court on his claim [rendering] his
decision to seek relief instead in a CFTC . . . an
effective waiver. 478 U.S. at 849.13 It was of
paramount importance to the resolution of the case
that either party could choose a forum to adjudicate its
claims, meaning that both parties had to consent to
agencys jurisdiction on their respective claims.
Recognizing that while parties can waive their own
right to proceed before an Article III court, they cannot
waive the structural limits imposed by the
constitutionally required separation of powers, the
Court nevertheless found agency adjudication of the
state-law counterclaims permissible. The Court rested
its decision on the premise that the counterclaims
arose out of the same transactions that were subject to
the initial CFTC complaint. But the Court never
approved an administrative tribunal adjudicating
private rights unconnected to any process of
adjudicating public rights within the sphere of
agencys regulatory purview. See Stern v. Marshall,
564 U.S. 462 (2011) (rejecting as unconstitutional the

13 Petitioners actions in Schor were also found to constitute an


explicit waiver of his right to proceed before an Article III
tribunal. 478 U.S. at 849.
28

bankruptcy courts power to try state common law


cases which do[] not flow from a federal statutory
scheme, nor are completely dependent upon
adjudication of a claim created by federal law.)
(quoting Schor, 478 U.S. at 856).
Inter partes reviews before the PTAB do not possess
the features that the Court has previously found
necessary to sustain the substitution of agencybased
adjudication for that of an Article III court. Unlike the
economic activities at issue in Thomas, Atlas Roofing,
and Crowell, all of which were subject to such
regulations and conditions as Congress deemed
appropriate, a patent is merely a right to exclude.
Possession of a patent does not imbue the owner with
the right to manufacture or market the patented
goods. Merely holding a patent does not mean that the
owner is engaged in any sort of regulated activity the
exact scope of which could be regulated by a federal
agency. Cf. Natl Fedn of Indep. Bus. v. Sebelius, 567
U.S. 519, 552 (2012). Under this Courts precedents, it
would be permissible to repose adjudicatory authority
over the actual patented goods travelling in a stream
of commerce in an agency charged with regulating
those goods. Thus, for example, it would be permissible
for Congress to grant the Food and Drug
Administration an authority to adjudicate disputes
about the products it regulates and the processes it
uses to regulate them. On the other hand, this Court
has never approved granting an administrative agency
judicial power over property that is not, in and of itself
subject to regulation. There is no argument that
patents, once granted, are themselves part of any
regulatory scheme. Quite the contrary, upon the issue
of [a] patent, the patent office . . . los[es] jurisdiction
over it. McCormick, 169 U.S. at 612.
29

Nor does inter partes review comport with the


requirement of consensual invocation of agencys
adjudicative mechanism. There is no question that a
patentee and an accused infringer can, by consent,
resolve their dispute in any way they see fit; from
litigation before a magistrate judge, to arbitration, to
a coin toss.14 Had the AIA merely provided consenting
patentees and accused infringers an opportunity to
resolve their dispute before a panel of expert patent
judges, there would be little to complain about. See
Pacemaker Diagnostic, 725 F.2d at 54143 (holding
that a voluntary waiver is required for patent issues to
be adjudicated by a non-Article III court). The inter
partes review, however, does not require patentees
consent. Instead, it allows any member of the public
to, at any time, hale a patentee before the PTAB and
force him to defend his vested property rights. Finally,
patent rights, while a creation of federal law, are not
merely regulatory rights that flow from a federal
statutory scheme. Rather, they are property rights
the acquisition of which is governed by a federal
statute. The same is often true of other traditional
property rights. Acquisition of land or chattels from
the federal government is often governed by statute or
regulation, but that does not transform traditional
property rights over the acquired land or chattels into
the type of regulatory rights that are amenable to
administrative adjudication.
B. Judicial Review of PTAB Decisions Is Too
Narrow to Satisfy Article III
An indispensable feature of statutes that have been
found to comport with Article III despite assigning

14Given the reputation of the PTAB as a patent death squad,


patentees may well prefer a coin toss.
30

some adjudicatory functions to administrative


agencies is the availability of robust judicial review.
When this Court upheld the Occupational Safety and
Health Act of 1970, it noted that while the
administrative agency was given the power to
determine facts and assess penalties for any violations
of the law, a dissatisfied party (whether a penalized
business or the government) could seek review in
federal courts. Furthermore, any fines imposed by an
agency were not self-executing, but could only be
enforced pursuant to court order. The Act would not
have survived review absent these judicial restraints
on agencys power.
In contrast, the PTABs power is not subject to
meaningful judicial review. As an initial matter, the
decision whether to institute inter partes review is not
subject to judicial review, 35 U.S.C. 314(d); Cuozzo
Speed Techs., LLC v. Lee, 136 S. Ct. 2131, 2136 (2016),
even though this seemingly preliminary decision is
often just as or more important than the final one.
From the perspective of the patent challenger,
erroneous failure to institute review ends the case
entirely and leaves no recourse against a potentially
unlawful agency action. From the perspective of the
patentee, an erroneous decision to institute review
may spell financial doom for his enterprise even if the
patents are ultimately vindicated.15 See Gregory Dolin
& Irina D. Manta, Taking Patents, 73 Wash. & Lee L.
Rev. 719, 758 (2016); Alden Abbott, et al., Crippling
the Innovation Economy: Regulatory Overreach at the

15An erroneous institution may also require a patentee to defend


his patent against challenges that should not be before the PTAB
because they are untimely or otherwise barred.
31

Patent Office, Regulatory Transparency Project of the


Federalist Society, Aug. 14, 2017, http://bit.ly/2x1b9cb.
Next, once the PTAB issues its final written
decision, a losing party may not have a benefit of an
appeal. While a patentee may always appeal adverse
PTAB decision, a losing challenger may do so only if he
possesses Article III standing. See, e.g., Phigenix, Inc.
v. Immunogen, Inc., 845 F.3d 1168 (Fed. Cir. 2017).
Since the AIA does not require a challenger to have
Article III standing in order to pursue an inter partes
review, a losing challenger may have no recourse
against an unlawful agency decision. Furthermore,
although a PTAB panel is not bound by a previous
panels decision, once one panel declines to find a
patent invalid on particular evidence, another panel
may decline to revisit the question even if brought by
a different party with Article III standing. In other
words, if a PTAB panel were to erroneously uphold a
patent following a challenge by a party with no Article
III standing, federal courts may never get a chance to
review that decision even if another challenge were
brought later on by a party with standing.
Finally, the judicial review is further truncated in
this context because the court of appeals is required to
defer to the PTABs standard for claim construction.
The PTAB uses a different claim construction
standard than the one utilized in federal courts,
reading each claim as broadly as possible, ignoring any
disclaimers that the patentee may have made during
patent prosecution or prior litigation. The broad claim
construction (which often flies in the face of the actual
meaning of the patent as established in prosecution
and litigation) leads to higher likelihood of a patent
being found invalid. The Federal Circuit, though it
32

reviews the PTABs claim construction de novo, does


not disturb the rather dubious principles on which
such construction rests. See generally Cuozzo, 136 S.
Ct. at 214246. These constraints on judicial review of
the most important issue underlying the ultimate
conclusion of patents validity emasculate the federal
courts and ultimately fail to comport with the
requirements of Article III. It may well be that the
PTAB may be an efficient and cheap alternative to
litigation, but ultimately, [t]he fact that a given law
or procedure is efficient, convenient, and useful in
facilitating functions of government, standing alone,
will not save it if it is contrary to the Constitution.
Granfinaciera, 492 U.S. at 63 (quoting Bowsher v.
Synar, 478 U.S. 714, 736 (1986)).
CONCLUSION
The Court should see the inter partes review
provision of the America Invents Act for what it is: a
congressional attempt to simultaneously treat patents
not as property, but merely as governmental largesse,
and to aggrandize the role of the political branches at
the expense of federal courts. But the proper forum to
litigate federal property rights is in the federal courts.
The decision below must be reversed.
Respectfully submitted,
GREGORY DOLIN ILYA SHAPIRO
University of Baltimore Counsel of Record
School of Law Cato Institute
1420 N. Charles Street 1000 Mass. Ave. N.W.
Baltimore, MD 21201 Washington, D.C. 20001
(410)837-4610 (202) 842-0200
gdolin@ubalt.edu ishapiro@cato.org

August 31, 2017